The World Leader in High Performance Signal Processing Solutions
Managing Channel Partner
Export Compliance
Dennis Farrell – Global Export Compliance Manager
Analog Devices, Inc.
Outline
 Analog
 Export
Devices Corporate Profile
Basics (3 Slides)
 Standards
 Vehicles
 How
to Consider
for Managing Channel Partner Export Compliance
Much Due Diligence is Enough ?
 Conclusions
& Other Business Considerations
Analog Devices, Inc. – Corporate Profile
Worldwide HQ: Norwood, MA
 Other Manufacturing & Engineering U.S. Sites – Wilmington, MA,
Greensboro, NC, San Jose, CA, Nashua, NH
 Global Presence in approximately 23 Countries
 Number of Employees: Approx. 9,000 (Worldwide)
 FY 2010 Revenue: $US 2.8 Billion (as of October 30, 2010)
 Primary Products: Digital Signal Processors, High Speed Digital  Analog
and Analog  Digital Converters, Accelerometers, Gyroscopes and other
MEMS devices
 Commerce Control List: Categories 3, 5 and 7
 Jurisdiction: U.S. EAR = 99%; ITAR = 1%
 Sales/Revenue Mix: Direct – 62% Channel Partners – 38%

5 Key Elements of Export Compliance
(Both you and your Channel Partners should know these)
•
What is the product ?
• Capabilities and performance levels
•
Where will it be used ?
• Prohibited country screening
•
Who is going to use it ?
• End-User screening (What line of business is the customer in ?)
•
How will it be used ?
• End-Use screening (How is the customer going to use ADI products? Will they be producing
weapons of mass destruction [nuclear, missile, chem/bio agents] ?)
•
Proliferation and/or diversion risks ?
• Red Flags – is there something unusual about the request or the order ? Example: Is the
customer not in the high tech industry, ordering unusually large quantities and are they offering
to pay cash for items purchased ?
•
Important: Even if a product is not export controlled based on its technical properties and/or
destination country, it may still require an export license based on end use.
Customer Based Controls
•
U.S. (and other countries’) export regulations require that exporters “Know their customers”
•
•
ADI is responsible for screening end users, even if they are not known at the time of original
order receipt
•
•
Example: ADI Sales to Distributors – screen all parties when order is received and after
Disti re-ships to their end user if they report the activity back to ADI via POS
All Parties should be screened against (at minimum) these Sanctioned Parties lists:
•
•
•
•
•
Screen ALL PARTIES on a transaction against various Sanctioned Parties Lists
•
Purchaser
•
Intermediate Consignees (taking possession of goods en route to end user)
•
Ultimate Consignee or End User
•
Freight Forwarders and/or Customs Brokers
US Denied Persons List -- http://www.bis.doc.gov/dpl/thedeniallist.asp
US Entity List -- http://www.access.gpo.gov/bis/ear/pdf/744spir.pdf
US State Dept Debarred Parties -- http://pmddtc.state.gov/licensing/debar.html
US Treasury SDN List -- http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf
Important: ADI’s Distributors also have a responsibility to perform all of the
above referenced screening activities and those on the next slide.
•
If a sanctioned party is discovered during screening, place the transaction on HOLD and
contact ADI to determine next steps.
End Use Controls
 End
Use is Important for Export License Determination
 Products
which are NOT export controlled based on their technical
properties may still require an export license based on end use
(this includes items classified EAR99)
 Under the U.S. EAR – if end use involves the use of an item in any
of the applications listed below, an export license may be required:
 Weapons of mass destruction (WMDs) [missiles, nuclear weapons,
chemical/biological weapons]
 Unsafeguarded nuclear activities (nuclear reactors, etc.)
 Space Launch Vehicles
 Unmanned Air Vehicles (UAVs)
 Maritime Nuclear Propulsion
Under EU Export Regulations, the military “catch all”
provisions for end uses are more robust than those under
U.S. Export Regulations
 Note:
Standards to Consider

Knowledge (US EAR Part 772) - Knowledge of a circumstance (the term may be a variant,
such as “know,” “reason to know,” or “reason to believe”) includes not only positive
knowledge that the circumstance exists or is substantially certain to occur, but also an
awareness of a high probability of its existence or future occurrence. Such awareness is
inferred from evidence of the conscious disregard of facts known to a person and is also
inferred from a person's willful avoidance of facts. This definition does not apply to part 760
of the EAR (Restrictive Trade Practices or Boycotts).

General Prohibition # 10 (US EAR Part 736) - Proceeding with transactions with
knowledge that a violation has occurred or is about to occur (Knowledge Violation to Occur).
You may not sell, transfer, export, re-export, finance, order, buy, remove, conceal, store,
use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item
subject to the EAR and exported or to be exported with knowledge that a violation of the
Export Administration Regulations, the Export Administration Act or any order, license,
License Exception, or other authorization issued thereunder has occurred, is about to occur,
or is intended to occur in connection with the item. Nor may you rely upon any license or
License Exception after notice to you of the suspension or revocation of that license or
exception.

Information “received during the normal course of business” (this can vary) – if you
have or receive information, you must do something with it

Example: Analog Devices receives POS or “sales out” data from our Authorized Distributors
Vehicles for Managing Channel Partner
Export Compliance

Export Language in Channel Partner Contracts




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Screening against Sanctioned Parties Lists (US and Other)
Buyer acknowledges and agree that items (commodities, software, technology) are subject to
the export control laws and regulations of the United States and/or other national governments
Specify which national laws (EAR, ITAR, EU regulations, other) – “including but not limited to
….”
Will not export/transfer to any country subject to a U.S. trade embargo or sanction or to any
resident or national of said countries
End Use Screening (WMDs, etc.)
License determination and procurement of required licenses

Make ECCN data available to Channel Partners (web site, e-mails, etc.)

Other Ideas:

Obtain an Annual Export Certification
 Have your Channel Partners certify, in writing, they have met ALL export-related provisions of the
contract

Conduct Occasional Desk Audits or On-Site Audits
 Example: ask for last 20 transactions for shipments to China for ECCN 3A001
How Much Due Diligence is Enough ?

Variables


Knowledge



What are your products and how many potential end uses do they have ? For
example:
 If your products are commercial or dual use with small likelihood to be used in
military/satellite/space applications and/or in Group D countries the amount of due
diligence you perform is likely to be BASIC
 If your products are dual use but there is a high probability they can be used in military
communications, radar and other like applications and ship often to Group D countries,
your due diligence is likely to be ADVANCED
 If your products are ITAR controlled, your level of due diligence is likely to be HIGH
You do not need to ask a lot of questions and you should not go “looking for trouble”
“Received during the normal course of business” --- unless you see a red flag or feel you
need to do more probing
US Law Enforcement Agencies (OEE, FBI, ICE, etc.)

You must establish a relationship with these agencies which will govern how many
questions they will ask you and how much “babysitting” they think you need to do
Conclusions and Other Business
Considerations
 There
is no “one size fits all” model for managing Channel Partner
export compliance or conducting the proper amount of oversight
 Business
model and product dependencies will dictate what your
acceptable level of due diligence should be
 You
have a business relationship with your Channel Partners …..
so……..

If you know your Channel Partner has committed an export violation, talk
with them about:
 Is it reportable (VSD) ? Consult with internal or external legal counsel
 Who will report it (you or them) ? Note .. should be them
 Don’t jeopardize your business relationship with a long time, loyal, competent
Channel Partner by jumping to conclusions and threatening to throw them
under the bus
Questions ?